Under Mayor Zohran Mamdani, Manhattan office real estate market is up

Fears of a corporate exodus from New York City are likely to be a recurring feature of New York City Mayor Zohran Mamdani’s term, with each business real estate decision magnified as a potential tipping point signal that the Democratic Socialist’s tax, real estate and wealth policies are pushing businesses away.

The debate was amplified last week amid reports that private equity giant Apollo Global Management was planning to add a second headquarters outside New York City, in a southern U.S. state like Florida or Texas.

Since being elected, Mamdani’s administration has said it will look at every viable option to help raise revenue and fill a $5.4 billion budget deficit for the city, but his preference has not changed from what he ran on: “tax the rich.” That has resulted in a political standoff with New York State Governor Kathy Hochul, who facing her own reelection campaign, has said she will not approve increased taxes on corporations and the wealthy.

“It’s a fragile environment today and we should be careful with this budget,” said Steven Fulop, Partnership for New York City president and CEO, on CNBC’s “Squawk Box” Monday. His group represents corporate, investment, and entrepreneurial firms. In an op-ed he co-authored last week, Fulop warned that any plan to tax the rich and businesses will ripple through the cost equation for every New Yorker. “With New Yorkers already leaving the state in search of a lower cost of living, further raising prices could send even more folks packing and undermine the state’s long-term economic growth,” he argued in the Newsday piece.

“Large companies [are] certainly exploring other options: cheaper labor costs, lower taxes, less political uncertainty,” Vikram Malhotra, managing director, real estate equities at Mizuho, wrote via email.

That’s nothing new. Lower-cost regions like the U.S. South are increasingly attracting both businesses and workers with cheaper real estate, lighter tax burdens, and fewer regulatory hurdles.

Wall Street is diversifying its office space footprint

Finance firms are among the big corporations that have been heading south and expanding into Texas and Florida from both U.S. coasts.

JPMorgan just built a new office building in Manhattan, but has more workers in its Dallas offices than New York City. Cathie Wood’s ARK Investment Management moved from New York City to St. Petersburg, Florida. Wells Fargo is moving its wealth management headquarters from San Francisco to West Palm Beach. Ken Griffin’s hedge fund giant Citadel moved its headquarters from Chicago to Miami, a relocation announced back in 2022. Griffin remains involved in at least one major new project in New York City.

While all these moves reflect a longer-term trend that is a risk for New York City, data from commercial real estate firm JLL covering the first quarter of Mamdani’s term shows that demand for office space and rents in Manhattan are up, while vacancies are down, continuing a trend that was in place at the…